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When Can a Plaintiff Recover Prejudgment Interest and Costs Above the Liability Limit of an Insurance Policy?

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In White v. Estate of Soto-Lerma, No. 17CA0292, (2018 COA 35), the Colorado Court of Appeals considered the question.

In a suit against a decedent’s estate, does the Nonclaim Statute allow a plaintiff to recover a judgment for prejudgment interest and costs above the limit of a liability insurance policy, even though the action was filed after expiration of the statutory period for presentation of claims?

Plaintiff Fannie White’s (“Plaintiff”) claim arose from a car accident that occurred about a year before decedent died from unrelated causes. More than two years after decedent’s death, plaintiff filed suit, asserting that decedent had been negligent. Decedent’s estate consisted solely of his automobile insurance policy, which had a policy limit of $50,000 per person injured in an automobile accident. The Estate of Julian Soto-Lerma (“Defendant”) rejected Plaintiff’s pretrial statutory offer of settlement for the insurance policy limit of $50,000. The case proceeded to trial, and the jury returned a verdict in plaintiff’s favor, awarding $100,000 in damages. The court reduced the jury’s award of damages to $50,000, consistent with Plaintiff’s representation at trial that she was only seeking damages in the amount of the insurance policy limit.

The court ultimately entered judgment for $79,218, which included $50,000 in damages, $11,600 in costs, and $17,618 in prejudgment interest. Defendant appeals the award of prejudgment interest and costs. Plaintiff cross-appeals, arguing that the trial court should have entered judgment in the entire amount of the jury’s verdict.

Defendant first contends that the trial court erred in awarding plaintiff prejudgment interest on the $50,000 damages award. Defendant relies on the Nonclaim Statute which bars all claims against a decedent’s estate that arose before the death of the decedent and were not presented within a specified timeframe. That statute conflicts with section 13-21-101(1), C.R.S. 2017, which provides that when a Plaintiff requests prejudgment interest, it is the duty of the court in entering judgment for the plaintiff to add a properly calculated amount of prejudgment interest to the amount of damages. To resolve this conflict, the Court must consider whether prejudgment interest is part of the underlying liability claim against a decedent’s estate and is therefore subject to insurance policy limits and the Nonclaim Statute’s bar on claims above policy limits.

The Court concludes that section Nonclaim Statute acts as a bar against an award of prejudgment interest above defendant’s $50,000 insurance policy limit. The Court says  the award of prejudgment interest sought by Plaintiff was a form of compensatory damages subject to the $50,000 insurance policy limit. Because Plaintiff could not recover prejudgment interest beyond the policy limit, the trial court’s award of $17,617.81 in prejudgment interest was prohibited. The Court reversed the judgment and remanded to the trial court to enter judgment for plaintiff in the amount of $50,000.

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